Overview of Anti-Money Laundering (AML) Regulations in the UAE
What is the governing legislation?
The UAE is a federal state consisting of seven Emirates and laws are issued on a Federal/ national level as well as on a local Emirate level. The regulators of financial activities in the UAE at the Federal level are the Central Bank and the Emiratis Securities and Commodities Authority (ESCA). ESCA has issued various resolutions and regulations governing listed companies in relation to anti-money laundering. The Central Bank issued the Regulations Concerning Procedures for Anti-Money Laundering on 14 November 2000 (as amended). Furthermore, there are a number of Federal regulations governing AML, including Federal Law no. 4 of 2002 on the Criminalization of Money Laundering (as amended) and its Executive Regulations (AML Federal Law).
On the local level, Dubai Law No. 4 of 2016 established a new economic regulator in Dubai which is the Dubai Economic Security Centre (DESC). The DESC is empowered to regulate and govern economic and financial activities and combat financial crimes including money laundering within onshore and free zones of Dubai. It is authorised to issue rules and regulations and coordinate with all local and federal governmental bodies and judicial authorities in exercising its powers. As the DESC has only recently been formed, the practical impact of its establishment is yet to be witnessed.
In addition to the AML Federal Law, some free zones in the UAE are regulated by additional rules, regimes and bodies. For instance, the Dubai International Financial Centre (DIFC) is regulated by the Dubai Financial Services Authority (DFSA) and Abu Dhabi Global Market (ADGM) is regulated by the Financial Services Regulatory Authority.
What is the definition of money laundering under the UAE federal laws?
Pursuant to Article 2 of the AML Federal Law, a person is deemed to be the perpetrator of money laundering crime if that person is fully aware that the relevant funds are derived from an offence or a misdemeanor and intentionally commits one of the following acts:
- converts, transfers, deposits, saves, invests, exchanges or manages any proceeds with the intent to conceal or disguise its illegitimate origin;
- conceals or disguises the true nature, origin, location, way of disposition, movement, rights related to any proceeds or the ownership thereof; or
- acquires, possesses or uses such proceeds.
What are the obligations under the AML?
Financial institutions and certain trading and professional entities such as real estate brokers, lawyers and accountants are required to perform certain compliance obligations including (but not limited to):
- obtaining and updating Know Your Client documents from natural and legal persons with whom they deal;
- keeping all documents, papers, correspondence and templates for a period of at least 5 years from closing the customers’ accounts;
- informing the specialised unit at the Central Bank of any suspicious transactions;
- verifying wealth sources of politically exposed foreign nationals and their families and persons connected with them and monitoring their transactions;
- appointing a compliance officer within the institution/ entity; and
- organising workshops, skills training programs and sessions and training any employees working in the area of AML and counter-terrorism or the financing of illegitimate organisations.
What are the penalties?
There are various penalties for AML crimes depending on the gravity of the AML crime committed. They range from a fine in the amount of AED 10,000 (for informing a person that investigations are currently being conducted on suspicious transactions) to AED 1,000,000 (for companies which commit any AML crime), as well as an imprisonment sentence from 6 months up to 10 years for conducting any AML crime. The penalties for AML crimes connected with terrorism are provided for under Federal Law No. 7 of 2014 on Counter Terrorism.
Furthermore, the Central Bank may impose administrative penalties against a company in breach of its obligations, from a warning to a fine (between AED 50,000 and AED 500,000) and/ or the cancellation of the company’s licence.